Siemens - open innovation case

Why did Siemens create an open innovation initiative? What perceived problems was the initiative trying to solve? What question or mandate would you imagine coming from senior leadership?

Parminder BindraParag DeshpandeSamuel KatzCliff KlettIttai Marom

Open Innovation Strategy

Executive Summary - Open Innovation at Siemens

Fox School of Business 2

PMBA - MIS 5402

• Global giant: 300,000+ employees with a global footprint in various industries• Traditionally a first-mover, or fast-follower, at the very least• Decentralized structure caused silo-ing and poor cross-company communication

• Open Innovation was an experiment to discover new ways to innovate• Initial intention of breaking down internal walls and identifying internal experts• Eventually shifted out in collaborations with universities and existing web services• Siemens case study demonstrates that Open Innovation has its pros and cons

• What’s the opinion about Open Innovation in business today?• Perspectives of senior leadership and the board might not align at all times• Siemens is an example of a meticulous, risk-averse, step-by-step integration of Open Innovation into a

company’s overall strategy

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• Open Innovation can be viewed as outsourcing problem-solving and idea generation by employing crowdsourcing strategies in the “flat” world of 21st century

• Enables an organization to leverage cross-sector collaboration through corporate labs, and cooperation with universities, research centers, and suppliers and customers

What is Open Innovation (OI)?


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Advantages

• Allows you to think outside the box and break free from old misconceptions

• Reduces cost of conducting research

• Incorporation of customers early in the development process

Disadvantages

• Risk of exposing a firm’s intellectual property

• May be viewed as disrupting the firm’s culture

• Subject Matter Experts and R&D personnel within the company may feel threatened with the influx of new product ideas

Open Innovation Funnel

Why did Siemens adopt open innovation?

• Siemens traditionally set industry trends, focused on being a first mover

• Fast-following after competition was also accepted

• By launching the Open Innovation initiative, Siemens was simply continuing to do what it had always done: innovate, this time by embracing a new innovative concept

• Siemens set out to explore its potential

• Despite a strong knowledge base and deep R&D, pockets of specialized information have become silo-ed within the company

• A potential tool to help identify technology experts within Siemens

First steps in Siemens Open Innovation Strategy


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Crowdsourcing of Ideas

Partnering with Universities

Founding of Start-ups

Investment in Start-ups

• The realization that it has decentralized structure did not encourage cross-pollination of ideas

• Barriers within the huge organization, hampering communication and flow of ideas

• Too many “reinventing the wheel” occurences where two separate business units face the same R&D challenges by themselves

• Competitive attitude between divisions lead to hoarding of knowledge

• To tap into unrecognized diversity and capabilities of professionals and amateur solvers to crowdsource short and medium term projects

What Problems Was Open Innovation Trying to Solve?


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“Wanted to overcome the barriers of silo thinking...”

#Innovation Leader @Siemens Launches Innovation Gallery on #NineSights

10/6/2014 NineSights press release

Dr. Thomas Lackner

Leadership Outlook - Senior Leadership & Board


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“This is a waste of our time and may damage our IP rights showing our rivals sensitive information & knowledge”

“A number of highly innovative companies have indeed included innovation goals in the CEO’s balanced scorecard”

Prof. Jean-Philippe Deschamps

Senior Management

Open Innovation

CT Divion is already doing everything necessary in the innovation environment

Regularly review and discuss the company’s innovation risk

Establish specific innovation goals for management

Include OI projects in-scope for audit testing in the bi-annual / annual risk assessment

Product life cycles are becoming shorter. The board must focus our attention to OI as a means of collating knowledge from different departments.

Siemens business is too complex for OI, and in these volatile times (2008) it seems a waste of money and energy

Going forward with OI may disrupt our relationship with the Workers’ Council

Development of a methodology to assess ROI on material OI projects

Thoughts - Board Members

Thoughts - Senior Management

The Global Financial Crisis of 2007-2008• US stock market reaches an all-time high in October 2007• Shortly thereafter, markets begin declining and initial signs of an impending crisis surface in the

following months, through the beginning of 2008• The subprime loans and credit default swaps crash of October 2008 leads to numerous

bankruptcies of mortgage and investment banks and puts insurance companies on the brink of collapse

• There is a subsequent world recession and global slowdown of economies

A Brief Historical Perspective


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Siemens adoption of Open Innovation in FY 2008-09• The years 2008-09, in the throes of a volatile and uncertain global economy, Siemens launches

its Open Innovation initiative.• Given the frankly terrifying condition of the global economy, this is certainly a bold move,

which required careful risk management and step-by-step development.

Other Success Stories of Open Innovation


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FirstBuild• FirstBuild backed by GE Appliances is a co-creation community

that is changing the way products come to market• The community influences the product from the very beginning

that helps to quickly deliver better products that improve the lives of our consumers

• Invent a new world of home appliances by creating a socially engaged community of home enthusiasts, designers, engineers, and makers who share ideas, try them out, and build real products

Current open innovation challenge

Crowdsourced entries for the challenge

Other Success Stories of Open Innovation


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Samsung Accelerator• The Accelerator is part of the Samsung Global Innovation

Center, which is dedicated to enabling entrepreneurs to thrive in all stages by providing access to Samsung resources, decision-makers, product roadmap, and the world’s largest platforms for distribution.

• The Samsung Accelerator provides strategic capital, office space, operational and product support to seasoned entrepreneurs so they can build market-driven software and services.

NASA's Open Innovation - Unlock The Future• Announcement of the new Technology Transfer Program• NASA to open up its patent portfolio with “no up-front

payment” (meaning NASA waives the initial patent licensing fees, and there are no minimum fees for the first 3 years)

• NASA will allow all manner of inventors, entrepreneurs, and tinkerers to start experimenting with NASA-owned IP.

Team insights

• Open Innovation is more than a tool - it is an additional layer in a company’s overall strategy

• It requires a centralized methodology to bridge between divisions and technologies

• Seeking outside perspective reduces your risk and the cost of not doing anything, as seen previously in the case of Kodak

• When adopting OI, senior leadership and the board must clearly indicate the mandate for aspects like multi-stage adoption, adapting company culture, managing exposure to the competition, considering external marketplace environment and many others.

Summary and Thoughts


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Aspects to consider while implementing

• What is the ROI of Open Innovation? Across divisions? How can you measure if sharing of ideas is actually contributing to your bottom line?

• Designing metrics for Open Innovation within a large organization is a challenge - how do you measure success? How do you set smart KPIs which can be used across the company?

References


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Ades, Cely, Aline Figlioli, Roberto Sbragia, Geciane Porto, Guilherme Ary Plonski, and Kleber Celadon. "Implementing Open Innovation: The Case of Natura, IBM and Siemens." Journal of Technology Management & Innovation Journal of Technology Management & Innovation 8 (2013): 113-14. Journal of Technology Management & Innovation, 11 Feb. 2013. Web. 15 Apr. 2016.http://www.scielo.cl/pdf/jotmi/v8s1/art57.pdf

Lockhart, Campbell. "Open Innovation – An Integrated Tool in Siemens | Innovation Management." Innovation Management. N.p., 05 Sept. 2013. Web. 15 Apr. 2016.http://www.innovationmanagement.se/2013/09/05/open-innovation-an-integrated-tool-in-siemens/

"Promoting Open Innovation." Siemens, n.d. Web. 15 Apr. 2016.http://www.siemens.com/innovation/en/home/innovation-strategy/promoting-open-innovation.html

“Open Innovation” n.d. Web. 15 Apr. 2016https://en.wikipedia.org/wiki/Open_innovation

“NASA Open Innovation Projects” n.d. Web. 17 Apr. 2016 http://www.nasa.gov/open/plan/open-innovation.html

Open Innovation http://bock-pm.com/service/open-innovation/

Chesbrough, Henry “Business Model Innovation”http://www.slideshare.net/SiliconValleyST/business-model-innovation-by-h-chesbrough